A personal loan is an unsecured credit option that you can use for various personal purposes like debt consolidation, large purchases, emergency expenses and others. Such loans typically are repaid in EMI, i.e., monthly installments over the period of 5 or 7 years. But it might take longer based on your payment diligence and circumstances. A personal loan is available through banks like SBI, PNB, BOI, etc., NBFC like Bajaj Finserv, Bajaj Finance etc., and various online platforms like Paysense, Kreditbee, etc.
Here are the top 10 popular reasons for you to avail personal loan:
1. Clear the credit card debt
Credit card debts are hard on the pocket. With the annual rate of interest of up to 24% p.a., this is a costly debt to hold, and if your repayment is not made within the due date, then your credit score may be impacted negatively. As an outcome, opting for a personal loan with lower interest rates is a better option. You can save money on interest while simply maintaining your credit history.
2. Fund a new business venture
Insufficient funds can place a stop to the dream of beginning a new business. On the other hand, personal loans can help you obtain finance to fund your business. You may even apply for a business loan, but in this case, you should prove your tax-linked documents and financial history, which may be difficult to avail of in case of a new business. As an outcome, a personal loan will be a practical option to pursue as this is much easier to attain.
3. Improving or creating credit history
When this is about credit cards and loans, your credit score is crucial. In case you do not have an excellent credit score, a personal loan might be able to assist you. Most people apply for personal loans to ameliorate their credit score by repaying loan dues within the due date to establish an excellent repayment history. This demonstrates high creditworthiness for the lender.
4. Healthcare emergencies
Deterioration of quality of life as an outcome of lifestyle factors might necessitate the use of funds for healthcare. Insurance policies hardly cover all the healthcare costs. Specific treatments and diseases might need you to repay a specific amount from your pocket. In such situations, a personal loan for healthcare emergencies is one of the prudent options. Loan amounts can be utilized to cover healthcare costs/therapies that you might need.
5. Vacation goals
Traveling to a new location can help refresh your soul and break the dullness of daily life. This is a financially vital decision to make savings towards vacation goals, wherein you can accumulate a good amount to mitigate your vacation expenditures. However, in the interim, making the advance bookings to these expenses, particularly hotels, flights etc., can assist you in acquiring a considerable price benefit, thus reducing your whole travel budget indeed. You can avail of a personal loan for the travel to ensure advance payments and repay the loans with your regular income at a later stage.
6. To fund marriage
Marriages are generally made in heaven, however, celebrated on earth. And many tend to squander a lot in such events. With the intention to celebrate in the grandest manner, the marriage expenditures can go off the budget. In place of witnessing financial stress, you can take a personal loan for meeting wedding expenditures and then systematically repay the loan on an installment basis.
7. Funding the new business
New business mostly requires certain capital to conceive as well as show its physical presence before they can invite debt and equity funding from the financial institutions and investors. As personal loans can be taken up with fewer hassles and in the absence of security or collateral, availing of these loans can be a highly accessible mode to conduct investments in new business. Thus, if you hold any such idea, you can make it a reality with a personal loan.
8. Funding big-ticket buys
You can avail of the personal loan to finance any big-ticket buys like gadgets and electronic appliances, for instance, refrigerator, laptop, washing machine, etc. It is a better option than spending huge sums per month. A personal loan enables you to defer the huge expenses over the future months as it is to be paid in the form of monthly installments in the future.
9. For higher education
While you might prioritize your ward’s career aspiration and make regular savings for it, the ever-rising cost involved in education might cause some deficit when attaining such financial goals. You can avail the personal loan for bridging such deficit and enabling your ward to avail admission in the desired stream and college, not permitting any financial burdens to alter these goals.
10. Home renovation
One mostly spends a considerable amount of time with family members at home. Getting your home renovated may be one of your requirements but owing to relatively higher costs, you may make it push below the priority list. A personal loan can assist you in making your requirement a reality, wherein your home renovation costs can be financed via such a loan to repay the same in monthly installments.
Conclusion
Personal loans are generally a kind of unsecured credit option, meaning you are not needed to provide collateral or security in the situation you do not repay your loan. There is nothing for the creditors like Kreditbee or Paysense to seize if you opt for the unsecured loan and do not repay the same. However, there are still some consequences, i.e., your credit score may plummet, and your loan may go into default. On the other hand, secured loans need security or collateral like a home in the situation of a mortgage or a car in the situation of a car loan. If you do not repay your secured loan, the lender can seize your property.
The unsecured loan utilizes your credit score as well as credit history to understand if you qualify. While auto and home loans need you to use the loan for a particular purpose, personal loans do not come with the same needs. Instead, you can utilize the personal loan for nearly anything, as long as it is within the terms of the loan agreement. Personal loans assist you with a lump sum amount, which you can pay through EMIs. It is distinct from credit cards, which are a kind of revolving credit.